Audit Exam 1 (Includes: Quiz 1 Questions, Quiz 2
Questions, Week 1 Recap, Week 3 Recap, Week 4 Recap,
Week 6 Recap, Homework 1-6 Self-Test Questions) With
Complete Solutions
A client approaches you and explains that they need to provide
financial statements to the bank for a loan application for a small
amount. The client says that the bank has requested some type of
assurance engagement on the financial statements. Which of the
following services can you not provide to meet this request?
a)
Compilation engagement
b)
Review engagement
c)
Audit engagement
d)
All of the above. Correct Answer a)
Compilation engagement
A client engagement letter should include all of the following
except:
a. the objective and scope of the audit.
b. the expected form and content of the audit report.
c. management's responsibilities.
d. the results of previous audits. Correct Answer d. the results
of previous audits.
A combined audit strategy:
,a. is appropriate when internal controls are minimal.
b. means that the auditor will gain the minimum necessary
knowledge of the client's system of internal controls.
c. requires the auditor to conduct extensive control testing.
d. means that the auditor will conduct extensive testing of
yearend account balances. Correct Answer c. requires the
auditor to conduct extensive control testing.
A Compilation Engagement provides more assurance than a
Review Engagement.
True
False Correct Answer False
A detailed audit plan:
a. is based on the overall audit strategy.
b. contains a description of the control testing procedures.
c. lists the audit procedures to be used in substantive testing.
d. all of the above. Correct Answer d. all of the above.
A public accountant has been asked by their client to perform an
IT system implementation for them. The public accountant does
not have experience doing this type of work. What rule is
applicable to this situation?
a)
Confidentiality
b)
Objectivity
,c)
Communication with predecessor auditors
d)
Competence
e)
Commission Correct Answer d)
Competence
A qualified audit opinion indicates:
a)
IFRS has not been followed for a particular transaction and it is
material but not pervasive
b)
The financial statements are fairly presented in all material
respects except for an immaterial error.
c)
An accounting error has been identified which is not material
d)
A scope limitation has occurred which is material and pervasive
e)
None of the responses provided Correct Answer a)
IFRS has not been followed for a particular transaction and it is
material but not pervasive
A sample in which every possible combination of items in the
population has an equal chance of constituting the sample is a
a)
Judgmental sample
b)
, Haphazard sample
c)
Random sample
d)
Biased sample Correct Answer c)
Random sample
A self-interest threat arises when:
a. the auditor owns shares in the client's business.
b. an assurance team member has recently been a director of the
client.
c. the auditor encourages others to buy shares in the client's
business.
d. the client threatens to use a different auditor next year.
Correct Answer a. the auditor owns shares in the client's
business.
A self-review threat arises when:
a. the auditor has a loan from the client.
b. the auditor represents the client in negotiations with a third
party.
c. the auditor performs services for the client that are then
assured.
d. there is a long association between the auditor and its client.
Correct Answer c. the auditor performs services for the client
that are then assured.
Agency theory explains that audits are demanded because
conflicts can arise between:
Questions, Week 1 Recap, Week 3 Recap, Week 4 Recap,
Week 6 Recap, Homework 1-6 Self-Test Questions) With
Complete Solutions
A client approaches you and explains that they need to provide
financial statements to the bank for a loan application for a small
amount. The client says that the bank has requested some type of
assurance engagement on the financial statements. Which of the
following services can you not provide to meet this request?
a)
Compilation engagement
b)
Review engagement
c)
Audit engagement
d)
All of the above. Correct Answer a)
Compilation engagement
A client engagement letter should include all of the following
except:
a. the objective and scope of the audit.
b. the expected form and content of the audit report.
c. management's responsibilities.
d. the results of previous audits. Correct Answer d. the results
of previous audits.
A combined audit strategy:
,a. is appropriate when internal controls are minimal.
b. means that the auditor will gain the minimum necessary
knowledge of the client's system of internal controls.
c. requires the auditor to conduct extensive control testing.
d. means that the auditor will conduct extensive testing of
yearend account balances. Correct Answer c. requires the
auditor to conduct extensive control testing.
A Compilation Engagement provides more assurance than a
Review Engagement.
True
False Correct Answer False
A detailed audit plan:
a. is based on the overall audit strategy.
b. contains a description of the control testing procedures.
c. lists the audit procedures to be used in substantive testing.
d. all of the above. Correct Answer d. all of the above.
A public accountant has been asked by their client to perform an
IT system implementation for them. The public accountant does
not have experience doing this type of work. What rule is
applicable to this situation?
a)
Confidentiality
b)
Objectivity
,c)
Communication with predecessor auditors
d)
Competence
e)
Commission Correct Answer d)
Competence
A qualified audit opinion indicates:
a)
IFRS has not been followed for a particular transaction and it is
material but not pervasive
b)
The financial statements are fairly presented in all material
respects except for an immaterial error.
c)
An accounting error has been identified which is not material
d)
A scope limitation has occurred which is material and pervasive
e)
None of the responses provided Correct Answer a)
IFRS has not been followed for a particular transaction and it is
material but not pervasive
A sample in which every possible combination of items in the
population has an equal chance of constituting the sample is a
a)
Judgmental sample
b)
, Haphazard sample
c)
Random sample
d)
Biased sample Correct Answer c)
Random sample
A self-interest threat arises when:
a. the auditor owns shares in the client's business.
b. an assurance team member has recently been a director of the
client.
c. the auditor encourages others to buy shares in the client's
business.
d. the client threatens to use a different auditor next year.
Correct Answer a. the auditor owns shares in the client's
business.
A self-review threat arises when:
a. the auditor has a loan from the client.
b. the auditor represents the client in negotiations with a third
party.
c. the auditor performs services for the client that are then
assured.
d. there is a long association between the auditor and its client.
Correct Answer c. the auditor performs services for the client
that are then assured.
Agency theory explains that audits are demanded because
conflicts can arise between:
